Shares of CVS Health fell more than 5% on Friday after the company issued another earnings warning and appointed a new CEO. David Joyner will succeed Karen Lynch at the helm of the healthcare giant in a change aimed to help the company return to profitable growth. CVS shareholders will surely be rooting for him after last week’s drop dragged the stock back to 2013 levels.
And while his task is far from easy, having to deal with rising costs and aggressive regulators at the same time, at least he seems to have been dealt a good Elliott Wave hand.
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The weekly chart of CVS Health shows that the post-2022 decline is part of a bigger structure, which actually began in 2015. It is a textbook regular flat correction, marked A-B-C. Waves A and B are both simple (a)-(b)-(c) zigzags, where wave (a) of A is a leading diagonal. Wave C is a five-wave impulse pattern, labeled (i)-(ii)-(iii)-(iv)-(v), where the five sub-waves of wave (iii) are also visible.
If this count is correct, CVS stock can be expected to make one last low in wave (v) of C below the $50 mark. Then, the entire A-B-C retracement from the 2015 top would be complete and it would be time for a major bullish reversal and the resumption of the preceding uptrend. So while the problems the company faces are without a doubt serious, Elliott Wave analysis suggests that the new CEO would manage to right the ship. New all-time highs lie ahead in the long term.
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